Will Buy Now, Pay Later Replace Credit Cards?
Written by
Sarah Sharkey
Edited by
Amen Oyiboke
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Buy Now, Pay Later (BNPL) services have become more popular in recent years. In fact, many customers using BNPL services enjoy the setup so much that they plan to phase out their credit cards. While some love BNPL, others can’t imagine this service replacing credit cards.
It’s impossible to predict the future. But it seems unlikely that BNPL services will completely replace credit cards in the future. We explore how BNPL is changing the financing landscape for shoppers below.
The Appeal of Buy Now Pay Later
In recent years, BNPL services have burst onto the scene as a way to make purchasing something attainable. You’ll find BNPL platforms built into many of your favorite shopping websites, often embedded in the checkout cart to make the purchase feel more affordable.
Many of these services break up your purchase into multiple installments, which you’ll often pay as your next paychecks come in. Sometimes, these smaller payments don’t come with interest attached. But if you miss a payment, you’ll often face interest charges.
With so many Americans struggling to make it paycheck-to-paycheck, the ability to break up the cost of a purchase into smaller increments is undeniably attractive.
Why Some May Choose BNPL Over Credit Cards
As BNPL services entered the scene, many consumers started to take advantage of the option.
According to a recent survey from C+R Research, 38% of BNPL users claim they plan to eventually replace their credit cards with these services. Plus, 56% of those surveyed said they prefer using BNPL to credit cards.
The survey found that the top reasons for using BNPL services over a credit card included ease of making payments, more flexibility on repayments than credit cards, an easy approval process, and little to no interest charges.
For those with limited credit, BNPL services offer a way to finance purchases in a way that works for their budget without any need to apply for and obtain a credit card. Additionally, the appeal of breaking up the cost of a purchase into manageable payments without interest likely brings many customers to this option.
Why BNPL Won’t Replace Credit Cards
Although the use of BNPL services is on the rise, it seems unlikely that these services will ever completely replace credit cards.
For starters, BNPL services don’t offer rewards, like cash back or travel points, which many consumer enjoy getting from their credit cards.
Additionally, BNPL services might be a convenient way to break up the cost of purchases online. But these services haven’t made it easy to use when making an in-person purchase at most stores. In contrast to easily swiping your credit card, dealing with the logistics of a BNPL service during an in-person purchase doesn’t seem appealing. Of course, this might change in the future. But for now, BNPL isn’t always a convenient option at a store.
Credit card companies have also started to take notice of consumers’ shifting preferences. As BNPL services became more prevalent, some credit card issuers started providing a similar experience within their cards. For example, the Chase Pay Over Time and Citi Flex Pay essentially allow you to break up a purchase into multiple payments for a flat fee.
Finally, BNPL services aren’t reliably showing up on your credit report, which means that responsibly paying off purchases through this option may or may not help you build credit.
Is BNPL Here To Stay?
Even though BNPL services likely won’t completely replace credit cards, it does seem like these services are here to stay. Beyond simply sticking around, it seems possible that more consumers will adopt BNPL services for certain purchases, especially in the online shopping space. With that, BNPL services may continue to eat into the long-held market share of credit card companies for years to come.
Which Should You Use: BNPL or Credit Cards?
When making purchases, you’ll often have access to both BNPL services and credit cards. So, which is best to use? The answer depends on your situation.
If you are making a large purchase and want to avoid interest charges, consider using a BNPL service to break up the cost. You’ll have some time to pay for the purchase without interest, likely a couple of weeks. But for everyday spending, it’s often easier to use a credit card.
Whether you are using a credit card or BNPL service, it’s critical to use your financing option of choice responsibly. If possible, avoid spending more than you can afford to pay off without interest charges. In the case of a credit card, this means paying off the bill in full every single month. For BNPL services, that means sticking to the agreed-upon payments to avoid incurring interest charges or fees.
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